IMF: "Ukraine War Causes Major Global Economic Setback"... Corporate Losses Also Snowball (Comprehensive)

by Jeong Hyunjin

Published 15 Apr.2022 13:28(KST)

[Image source=Reuters Yonhap News]

[Asia Economy Reporters Kim Hyun-jung and Jung Hyun-jin] The International Monetary Fund (IMF) has warned that the global economy is significantly retreating due to the impact of the Ukraine war, forecasting downward revisions to growth rate projections for various countries. As the war approaches two months, the scale of damage to global companies continuing operations in Russia is also snowballing.

According to the Wall Street Journal (WSJ) on the 14th (local time), Managing Director Georgieva stated in a speech at the Carnegie Endowment for International Peace that "Russia's invasion of Ukraine is delivering a shock to the global economy, causing major disruptions to countries' efforts to recover from COVID-19," and announced that at the upcoming IMF and World Bank (WB) Spring Meetings, growth forecasts for 143 countries accounting for 86% of the world economy will be revised downward.

◆ From COVID-19 and Supply Chain Issues to Inflation and War = She said, "Most countries are expected to experience low growth and high inflation," but did not disclose specific figures such as the extent of growth slowdown. Earlier in January, the IMF had projected global economic growth at 4.4%, which was 0.5 percentage points lower than the October forecast last year, reflecting the Omicron wave, supply chain disruptions, and inflation.

Managing Director Georgieva expressed particular concern that the war between Ukraine and Russia, major exporters of wheat and fertilizer, could lead to severe damage in some regions such as South Africa and Latin American countries due to rising food prices. She also noted that recent inflation rates have reached a 40-year high in the United States and a 30-year high in the United Kingdom, forecasting that rapid price increases will continue for some time.

She emphasized, "The task of central banks and economic policymakers is to curb high inflation and rising debt while maintaining key expenditures and building a foundation for sustainable growth," adding, "Central banks facing these challenges must understand economic trends, appropriately adjust policies, act decisively, and communicate clearly."

◆ Snowballing Corporate Damage... Over 600 Companies Withdrawing = The scale of damage to global companies operating in Russia is also growing. According to Yale University's tally, more than 600 global companies have withdrawn from Russia since its invasion of Ukraine on February 24. As the first quarter earnings announcement period approaches, companies are currently assessing related impacts, WSJ reported. Professor John McNees of the University of Texas said, "The scale of corporate damage depends on whether it involves disposing of assets within Russia or simply suspending operations."

The company expected to suffer the greatest damage is the British energy firm British Petroleum (BP). BP announced plans to divest a large portion of its stake in Russian oil and gas company Rosneft, projecting a provisional loss of about $25 billion (approximately 30.8 trillion KRW). Swedish telecommunications company Ericsson also announced an indefinite suspension of its Russian operations, estimating damages of around $95 million.

French bank Soci?t? G?n?rale is expected to see a reduction in profits exceeding $3 billion due to the sale of stakes in Rosbank and others. ExxonMobil also decided to withdraw its 30% stake from a project on Sakhalin Island in Russia's Far East, recording an accounting charge of $4 billion.